EPAct 179D Experts

"The least expensive kilowatt, is the one not used."

- Jacob Goldman

The LED Lighting and Tax Aspects of Gym Facility Physical Fitness

Gym owners and personal trainers who measure and monitor customer customers
weight, body fat, and overall fitness should apply the same thinking to the
energy consumption of their facilities.

Once measured against energy fit gyms the energy workout regime should
become clear. Like virtually all retailers, gym owners are moving quickly to
retrofit with LED lighting by December 31st 2013 to secure large EPAct tax
deductions.

EPAct Tax Savings Opportunity

Pursuant to Code Sec. 179D, as enacted by the Energy Policy Act of 2005
(EPAct) , properties that make qualifying energy-reducing investments in new or
existing locations can obtain immediate tax deductions of up to $1.80 per
square foot.

If the building project does not qualify for the maximum EPAct $1.80 per
square foot immediate tax deduction, there are tax deductions of up to $0.60
per square foot for each of the three major building subsystems - lighting;
heating, ventilating and air conditioning (HVAC); and the building envelope.
The building envelope comprises of every item on the building's exterior
perimeter that touches the outside world including roof, walls, insulation,
doors, windows and foundation.

LED Lighting

Fitness centers should endeavor to install energy efficient long life LED
lighting at better of 1 watt or less to qualify for maximum tax incentive. It
is crucial for gyms to be aware of the EPAct lighting tax standard since merely
meeting the ASHRAE code requirements of 1.1 watt will result in only a 35%
improvement as compared to the ASHRAE 2001 tax reference standard.

HVAC Strategies

HVAC control strategies in these facilities can greatly reduce operating
costs since they have cooling needs before and after normal business operating
hours when electricity rates are often measurably lower. For heavy morning use
facilities, one strategy would be to cool the facility in the morning before
members enter, and utilize that cooling level to cover the higher business hour
day-time rates.

For the evening member influx the strategy would be to vamp up the cooling
output right after the business day when the lower electric rates kick in
(which should be concurrent with evening member influx).

The market has seen a decrease in hard goods manufacturers and an increase
in service categories requiring improved and efficient HVAC. Among these
service categories are health clubs and gym facilities which can implement
highly efficient HVAC technology to reduce operating costs .

The table below presents the EPAct tax incentives available for some of the
largest fitness chains:

Healthcare Plans Reward Wellness

A large number of healthcare plans are incentivizing health and wellness
program participation. Offering as much as 50% gym membership reimbursement,
companies like Aetna Cigna, United Healthcare, BlueCross Blue Shield, and Tufts
are bringing more and more members into fitness facilities.

Employer wellness programs are also incentivizing physical fitness by
offering discounts for maintaining and/or achieving health standards. This is
becoming increasingly popular as a study has shown “average employer
medical costs falling $3.27 for each dollar spent on wellness and a $2.73
reduction in employer costs associated with absenteeism”.

Many of the employer wellness programs provide incentives based on certain
health standards that need to be met. Annual discounts are awarded to employees
with cholesterol levels below 200 and annual deductibles are waived for
employees with a BMI (body mass index) at or below 26 .

Both of these health standards can be met through fitness regimens and with
the influx of the insured taking advantage of the membership reimbursement, it
is even more important for gym facilities to become energy efficient.

Fitness Facilities in the Market

In addition to healthcare companies, there are many others that have been
working towards providing tools and methods for increased health, particularly
for obesity. Fitness and weight-loss centers play a large role in creating a
healthier America and can benefit greatly from simultaneously lowering energy
costs and utilizing accompanying Federal tax incentives.